Congress approved, H.R. 1, the Tax Cuts and Jobs Act, this week, marking the first time in 30 years since the tax code has been overhauled.
The final bill is a compromise between the House and Senate versions which both chambers passed earlier.
Highlights in the bill include:
Corporate tax rate – Reduces the corporate tax rate to 21 percent beginning in 2018, and makes that rate permanent.
Individual tax rates – Retains the current number of individual tax brackets at seven and reduces rates to: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 39 percent. All new rates expire at the end of 2025 when existing rates will be reestablished.
Corporate alternative minimum tax – Eliminated.
Bonus depreciation – 100 percent expensing through 2022 then phased out through reductions by 20 percent per year through 2027.
Pass-through entities – Pass-through entities, which are typically small businesses, would see a 23 percent deduction of qualifying pass-through income. The provision would expire at the end of 2025 and treatment would return to existing policies.
Section 179 expensing – Increased to $1 million with a phase out beginning at $20 million.
Health insurance – Repeals the fine imposed on individuals who do not purchase health insurance, often referred to as the “individual mandate.” It is important to stress that the requirement that an employer offer health insurance to their employees (the “employer mandate”) remains in effect and is being enforced.
Please click here to see a chart outlining the House and Senate versions of the bill as well as the final outcome.